Week 3 - Discussion 1 - The controller of Sagehen...

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The controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method. The controller’s bonus is based on the next income. It is the controller’s belief that the switch in inventory methods would increase the net income of the company. What are the differences between the LIFO and FIFO methods? Knowing that “Income minus cost of goods sold, expenses and taxes equals’ net income” [Wik15], it would make sense that the controller’s beliefs are correct and that switching would increase the net income of the company because utilizing the FIFO method would lower the cost of goods sold, therefore increase the bottom line or net income. This of course assumes that there would be an ongoing increase in the cost of the asset that is being sold. According to this week’s lecture: (not sure how to cite this info, so I used the text as a cite reference) “The FIFO method of inventory, when used for costing purposes, will result in the firm selling the

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